100Pc stock relief now harder to get

While young farmers welcomed the renewal of 100pc stock relief in the Budget last December, little did they know at the time that several conditions would be attached to the revised measure making it harder to claim in the future.

While young farmers welcomed the renewal of 100pc stock relief in the Budget last December, little did they know at the time that several conditions would be attached to the revised measure making it harder to claim in the future.

100pc Stock Relief

Currently, 100pc stock relief (instead of the normal 25pc) is available to farmers who are under 35 years of age and who meet certain training requirements. An example of the operation of the relief:

nOpening stock at January 1, 2012: €20,000

nClosing stock at December 3, 2012: €25,000

nIncrease in value of trading stock: €5,000

nFarm profits for year ended December 31, 2012: €6,000

nLess stock relief (100pc increase in stock): €5,000

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nRevised farm profits for 2012: €1,000

The recently published finance bill introduced changes which are due to be signed off on by the Minister for Finance, Michael Noonan. These changes are as follows:

nFirstly, individuals seeking 100pc stock relief for the first time in 2012 or any subsequent year will now require a business plan to be submitted to Teagasc, unless such a plan has already been submitted for other schemes (such as an application for new entrant milk quota).

nSecondly, the scheme is extended for three years to December 31, 2015.

nThirdly, the maximum amount at the 100pc rate will now be limited to €40,000/yr and €70,000 over the course of the scheme (four years).

Previously, a farmer could claim an unlimited amount of stock relief at the 100pc rate.

nFinally, a young trained farmer must fall within the definition of small and medium-sized enterprises, but this won't be an issue for any Irish farmer.

Relief from CGT for Land Consolidation

The Minister for Finance announced a new measure in the Budget entitled Relief for Farm Restructuring.

The relief will apply to a sale, purchase or exchange of agricultural land in the period from January 1, 2013 to December 31, 2015 where Teagasc has certified that a sale and purchase or an exchange of agricultural land was made for farm restructuring purposes.

The first transaction must occur between January 1, 2013 and December 31, 2015, and the subsequent sale or purchase must occur within 24 months of that sale or purchase.

Full relief from capital gains tax will be given where the purchase price or the exchange value is equal to or exceeds the sale price or the value of the other land that is exchanged.

Where the opposite is the case, marginal relief will apply.

The amendment is also subject to a commencement order from the Minister for Finance. It is disappointing to note that a similar relief was not introduced for stamp duty.

Instead, the sale, purchase or exchange of farm land for farm restructuring will be subject to stamp duty at a current rate of 2pc.

Previously there was relief from stamp duty in the form of Farm Consolidation Relief which applied to transfers between July 1, 2007 and June 30, 2011.

Representations have been made to Revenue after the Budget by the Irish Tax Institute to extend Farm Restructuring Relief to stamp duty. Hopefully it will be included in the finance act.

Partnership Register

The finance bill also provides for the establishment of a farm partnership register to cater for all partnerships.

This is a progression from the Milk Production Partnership register which catered only for dairy farm partnerships. This register is to be established by legislation enacted by the Minister for Agriculture. The legislation will include the following:

nConditions with which a farm partnership shall comply;

nThe minimum and maximum number of people who may participate in a farm partnership;

nThe assignment of a unique identifier to a farm partnership included on the register;

nProcedures for addressing non-compliance with the conditions for registration.

The benefit of being on the register of Milk Production Partnerships relates to the farm partners being able to avail of beneficial tax treatment and to qualify for Department of Agriculture and other European Union schemes. By broadening the register to include all systems of farming, it is likely that farming in partnership will grow in popularity over the coming years.